In a new alert, the SEC is seeking the help of investors to do background checks on new and existing brokers who may or may not be registered financial and investment advisors.
A recent judgment in FINRA arbitration for nearly a quarter of a million dollars against a broker who sold Woodbridge notes to investors has struck fear in the hearts of many firms who weren’t paying attention to their brokers over the past few years. If one firm can be held responsible for the failings of a broker, they all potentially can. And that’s a billion-dollar problem.
Over much of last year, heated debate raged within the securities industry and among some politicians about the “best interest” standard and how it should be applied to registered financial advisors and stock brokers alike. Right now, two different standard apply to the industry. Bringing them all under one standard would unify a fractured industry and give greater clarity and increased protection to investors who may be unaware of which standard they are subject to.
Once you're inside a Ponzi Scheme, it can look and feel a lot like a normal investment opportunity, especially if the scheme operator is adept at creating false investment documentation. The key is not to get draw into a Ponzi Scheme in the first place. The most common signs of these frauds are evident from the beginning - that's when you have the greatest chance of identifying them.
According to recent information released by the securities industry watchdog, FINRA (Financial Industry Regulatory Authority), over his long 35 year career with major brokerage houses including Stifel and most recently Wells Fargo, former Certified Financial Planner John Gregory Schmidt formed close personal relationships with elderly and infirm clients in order to win their trust and steal their money.
According to the Massachusetts Depart of Justice, Raymond Montoya ran his Ponzi scheme for almost a decade under the auspices of a fund called RMA Strategic Opportunity Fund, LLC. Over the years, investors transferred millions of dollars to Montoya on the promise that he would invest the money in stocks and bonds.
An investment advisor charged by the Securities and Exchange Commission with running a multi-million dollar Ponzi scheme spent close to a million dollars on prayers from Hindu priests in order to keep the feds at bay. In spite of her prayers, however, Dawn Bennett was convicted by the federal government of defrauding more than 200 investors of nearly $18 million over the past several years.
According to the US Attorney’s office in Arizona, a group operating a Ponzi Scheme solicited millions of dollars in investments for various companies and projects, including real estate, recycling, and land development in Mexico. The solicitations were made through numerous seminars, magazines articles, radio broadcasts, and private offerings.
In the aftermath of Enron, the Financial Crisis, and the Wolf of Wall Street, you might think that regulators who are charged with protecting small retail investors as much as the markets themselves would sharpen up the rules and regulations governing the financial industry. Unfortunately, a series of announcement recently opined about in the New York Times suggests that small investors are more, not less, vulnerable to Wall Street’s predations than they’ve ever been.
The SEC (Securities Exchange Commission) announced today that it has obtained a court order to shut down a major investment operation worth approximately $345 million. According to the SEC complaint, the scheme involved more than 230 investors from the United States and was lead by Kevin B. Merrill and Cameron Jezierski.
Financier Steve Stovanovich liked to play the big man. Over the past few years, he has pledged multimillionaire donations to the University of Chicago and institute named on his behalf. But as a recent investigation by the Chicago Maroon has revealed, Stovanovich may not possess the vast wealth he says he has.
According to public records, Greensburg, Pennsylvania based brokerage firm, Trustmont Financial Group, Inc. was ordered by the Financial Industry Regulatory Authority to pay an aggrieved client more than $1 million in damages.
According to the SEC's complaints, salespeople for the recently bankrupted Woodbridge group brought in millions of dollars in commissions for themselves largely by promising elderly wealthy investors guaranteed returns on the investments.
In a recent Securities and Exchange Commission complaint, the SEC alleged that insurance broker James E. Hocker of Bellefont, Pennsylvania engaged in fraudulent investment scheme that lasted approximately seven years, from 2010 to 2017.
The SEC’s Office of Compliance recently issued a Risk Alert concerning lapses in brokerage supervision and compliance controls on the sale of structured products - especially structured notes - to retail investors. Several months ago the SEC also issued a broader Investor Bulletin concerning structured notes. The Financial Industry Regulatory Authority (FINRA) has also repeatedly urged investors to be careful when considering structured products.
The Securities and Exchange Commission (SEC) issued a litigation release to the public concerning Pennsylvania-based financial advisor Malcolm Segal. The SEC charged Malcolm Segal with numerous violations, including the operation of a Ponzi Scheme and stealing investor money to enrich himself.
Before signing your account opening documents with that exciting new stock broker you saw on TV or heard from a friend was a pure money-maker, do your own due diligence and go beyond Google by running a BrokerCheck.
Ramping up their effort to become a kind of consumer protection agency for novice investors, the SEC recently launched a very helpful site featuring tons of great investment advice at Investor.gov.
A lot of the suggestions featured here are also included in our 10 Tips for Financial Self-Defense, so download that if you haven't already. In order to supplement your arsenal of weapons in the fight against financial misconduct and bad brokers, check out the SEC site. It touches on everything from how markets work to investment basics to retirement planning. Of course, this body of knowledge is exactly why, as a novice investor, you might engaged the services of a broker. But as with everything from buying a car to picking the right doctor, the more research you can do on your own, the less likely you will be to get fleeced. Information, after all, is power. And there's a wealth of information on the SEC site. Click here to go to the introductory video that gives you a tour.
For the social media savvy, better hop on the SEC Investor Ed twitter feed. We have! Here, you'll get updates and investor alerts that will help you get out in front of problems with your investments that you may not have anticipated or simply do not understand. For example, Ponzi schemes. We've got a page on our site explaining the history of the Ponzi scheme and how it works. If you thought these scams faded with the incarceration of Bernie Madoff, think again. According to the latest SEC investor alert, they are alive and well among virtual currencies like Bitcoin. Other alerts on scary yet fascinating topics include Investment Options Implying SEC Endorsement, Pump-and-Dump Stock Email schemes, and Binary Options and Fraud. With our own blog here at The Green Firm, we'll do our best to keep abreast of the latest trends in investor scams and try to develop the legal angle for you. So stay tuned to the SEC and to us!
As always, if you or anyone you know has been the victim of broker misconduct or investment fraud, please contact us immediately for a free consultation.
The financial world has been undergoing several years of reform, to varying degrees of success. But the more circumscribed world of financial advisers has lagged behind--until now. If you’re an investor or even just a casual reader of the Business or Financial pages of the newspaper, get ready to hear a lot more about “fiduciary standard” in the next few years.
According to several recent articles, the SEC is gearing up its campaign to raise the standard for financial advisers who often claim, especially when they’re being sued for misconduct or negligence, that they’re only “order-takers” when it comes to important investment decisions. Yeah, right. Then why all the fees? And why call themselves “advisers” at all?
The truth is, at the moment, financial advisers are held to a somewhat lower standard of fiduciary obligation known as “suitability.” This standard involves a suitable match between a customer’s stated investment objectives and risk-tolerance and the financial products a financial advisor places them in. The SEC’s new standard would raise the bar. Brokers would not simply be asked to ensure that investments comply with suitability, but that brokers uphold the interests of their clients absolutely. As an article on CNBC mentions, “The current regulatory system means that brokers are legally permitted to recommend a higher-priced mutual fund to investors even if they know a low-cost one with better returns exists. Many brokers are compensated partly by commissions from mutual funds.”
With the SEC’s help, the world of investment just may become a little safer and more friendly to the interests of investors whose money is at stake in the first place. After all, shouldn’t financial advisors who are responsible for the life-savings of many of their customers, be held to professional standards that resemble the standards of lawyers, doctors, and CPAs? Of course they should. Right now, brokers are having it both ways. They take significant fees for their expertise, but they deny responsibility when that “expertise” fails them and damages customers.
How often do you read the fine print? Or, ok, let's make the question more concrete... Have you read our site disclaimer? It sits at the very bottom of the page there, down in the footer, in a font that's a little smaller than our body text font so as not to annoy people, and it definitely qualifies as a kind of fine print. It's ok if you've never read it. It's not like we're asking you to sign away your rights based on what's in the disclaimer or anything--we're not your brokerage company or financial adviser. Because that's basically what they do. We'll come to the point: it's just as unlikely for you to read The Green Firm site disclaimer as it is for you to read the fine print in the agreement you signed with your brokerage or financial adviser that gets you to waive your right to file a claim against them in court or to participate in a class-action lawsuit. Don't know what we're talking about? Well... Chances are you already signed the agreement without even realizing what you were giving away. And that's exactly what the brokerages count on.
Fortunately, there's been a push recently by some politicians along with an influential member of the SEC to onsider adopting new rules that would prevent or restrict brokerages from forcing customers to sign away their right to sue. As things stand, if your broker loses all your money through chicanery or negligence and you want to sue him or her and their supervising brokerage firm, you will have to take your case before an arbitration panel administered by the Financial Industry Regulatory Authority, or FINRA. No trial, no jury--just you, attorneys, and an arbitration panel. Now, brokerages like to argue (as credit card companies do as well) that binding customers to arbitration reduces legal costs and help with frivolous litigation. Well, fine, that's bully for them! But from where we sit--and it seems like more and more people are starting to agree with us--this arrangement doesn't just favor the interests of the big brokerages and advisers, it's unjust and, dare we say it, borderline UnAmerican.
Yeah, ok, we should all read the fine print. But realistically, as we demonstrated above, most people don't. This puts customers in the awful position of being fleeced not once but twice: first, when the brokerage gets them to sign away their right to sue or join a class-action suit; and then again when their advisers through negligence or misconduct lose the customer's hard-earned cash.